Banc of America is out on Knight Capital Group (NASDAQ:NITE) after yesterday's turmoil saying that while August has clearly been a rocky month for Deephaven, it was not as bad as some had suspected. Given the meaningful decline in the stock (which, in retrospect, appears a bit of an overreaction), they believe the stock could see a bounce today. That said, Deephaven performance is negative 3Q07 to date and could weigh on earnings unless performance turns around over rest of quarter.
Deephaven's Flagship Global Multi-Strategy Fund LLC and Global Multi-Strategy Fund Ltd. were down an estimated 2.24% and 2.23%, respectively. Deephaven's Event Fund LLC and Event Fund Ltd. were down an estimated 4.16% and 4.18%, respectively
But performance up to July 31, 2007, was positive: Global Multi-Strategy Fund LLC and Global Multi-Strategy Fund Ltd. were up 6.80% and 6.68%, respectively. Event Fund LLC and Event Fund Ltd. were up an estimated 3.58% and 2.99%, respectively.
So, year-to-date performance right now is not as bad as first thought, with Event funds only down 0.7% and 1.3%, respectively, and multi-strategy funds up 4.4% and 4.3% respectively. Given that the firm believes the multi-strategy fund is the larger of the two funds (which account for 85%-90% of total AUM), they believe year-to-date performance at Deephaven is still positive overall.
Still, 3Q07 is going to be challenging, as returns are going to be negative unless performance improves over last month of the quarter, and we could see Deephaven report a loss to reverse accrual accounting from 1H07.
Maintains Buy on NITE.
Notablecalls: I was positive on NITE yesterday, calling for a bounce around the $13 level. The stock never reached that level, so unless some of you had more conviction early on, no trade was triggered.
Today, we have BAC out calling for a bounce saying things are likely less murky than most think. With the stock close to the $13 I think this call is certainly worth the shot.
Of note, Sandler O'Neill maintained their Buy rating and $20 tgt on NITE yesterday.